Chapter 6 Flashcards
Sourcing
The process of identifying a supplier that can provide a needed good or service at the right price, time, and quality
Strategic Sourcing
A comprehensive approach for locating and sourcing key suppliers, so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace over an extended period of time
SCM professionals are constantly seeking out creative ways to
reduce costs, improve quality of the final product, and achieve a faster time to market
How does strategic sourcing work
- Identifying key suppliers
- Cultivating relationships
- continuously improving skills
- understanding and embracing possibilities
Identifying suppliers: trying to locate…
the best quality materials at the lowest possible cost from the most reliable suppliers
Objectives of strategic sourcing
- improve the value-to-price relationship
- understand the category buying and management process, to identify improvement opportunites
- examine supplier relationships across the entire organizaation and share best practices across the organization
- develop and implement multi-year contracts with standardized terms and conditions across the organization
- leverage the entire organizations spend
Single-Source
a sourcing strategy where there are multiple potential suppliers available but the company decides to only purchase from one
Sole source
there is only one supplier for an item
Multi-Source
purchasing a good or service from more than one supplier, may be used to create competition between suppliers in order to achieve higher quality and lower price
Functional Products
MRO items and other commonly used low cost items with relatively stable demands and high levels of competiton (office supplies, food staples, hardware)
- Reliable, low-cost suppliers, MULTI SOURCE
Innovative Products
Characterized by short product life cycles, volatile demand, high cost, less competition (iphone, medical devices)
Innovative cutting edge supplier SINGLE SOURCE
Spend Analysis
Categorizing and analyzing expenditure data for the purpose of lowering costs, improving efficiency, and monitoring compliance
Non-critical
routine items that involve a low percentage of the firms total spend and very little supply risk
Bottleneck
unique procurement problems, supply risk is high and availability is low, small number of alternative suppliers (coffee beans, cocoa)
Leverage
commodity items where many alternatives of supply exist, and supply risk is low. Spend is high and there are potential procurement savings (steel, copper)
Strategic
strategic items and services that involve a high level of expenditure and are vital to the firm’s success
Supply Base
the group of suppliers from which a company acquires goods and services
Supply Base Rationalization
Objective is to reduce supply base to lowest number of suppliers without significantly increasing risk
Competitive Negotiations
Aka adversarial relationships, parties engage in competitive struggle over fixed value, attempt to maximize value for their side, minimal information sharing
Counterproductive Negotiations
Aka antagonistic relationships, parties work actively against each others needs, neither party takes responsibility for what happens, destructive conflict
Cooperative Negotiations
Parties work together and share information, closer relationship as a result of mutual goals and trust, supplier and buyer involvement increases
Collaborative Negotiations
Congruence of goals between parties, parties work together to create new business opportunities and share risk, work jointly to identify creative problem solutions
Reverse Auctions
A sourcing technique where pre-qualified suppliers enter a website at pre-designated date and time and try to underbid competitors to win the buyers business
Vendor Managed Inventory
Suppliers directly manage buyer inventories to reduce the buyers inventory carrying costs and avoid stockouts for the buyer
